Bond Expert: Tuesday Wrap

Prices of Treasury coupon securities pirouetted about today as a variety of forces buffeted the market.

I think that the strongest influence on prices this week is the supply tsunami from Timothy Geithner and his acolytes ( and various subalterns) at the Treasury. So it is all about shooting the taxpayer in the big toe and padding the P & L as the year draws to a close.

It would seem that the dealer community accomplished that objective today with surgical precision as, by my reckoning, the Treasury market hits its nadir right around the 1:00 PM moment when it was necessary to submit bids. The yield curve should steepen over the course of the week as the weight of the 10 year note and 30 year bond supply proves itself ponderous and onerous.

There were other distractions such as the reports of the eclipse of the dollar as the reserve currency as well as the related surge in commodity prices.

The yield on the 2 year note has climbed 2 basis points to 0.90 percent. The yield on the 3 year note has jumped by 3 basis points to 1.37 percent. The yield on the benchmark 5 year note has increased 3 basis points to 2.23 percent. The yield on the 7 year note is up 2 basis points to 2.84 percent. The yield on the 10 year note has increased 3 basis points to 3.25 percent. The Long Bond is the relative value loser this day as its yield has increased 4 basis points to 4.06 percent.

The 2 year/10 year spread widened to 235 basis points.

The 10 year/30 year spread is 81 basis points.

The 2 year/5 year/30 year spread is 50 basis points.

Swap spreads are posting mixed results this day. Two year and 5 year spreads are unchanged at 36 and 37,respectively. Ten year spreads and thirty year spreads are each a basis point wider at 18 1/2 and NEGATIVE 9, respectively.

Corporate bonds

Corporate bond market continues firm and tenaciously clings to the gains achieved this morning. Salesmen report that there is no sense of retreat as the earlier outsized gains in stocks have been halved.

There was a bit of issuance today by companies that are not exactly household names.

Protective Life (PL) brought $700 million 10 years and 30 years in the low 400s.

Boston Properties (BXP) sold $700 million 10s at T+ 2 5/8. Early talk was 275.

RPM International (RPM) sold $300 million 10 year notes at T+ 2 7/8. Early talk on that bad boy was low 300s.

Issuance should remain light through the blackout (earnings) period.